When the debtor doesn’t pay – Vindicating claims in Hungary
Vindicating claims is often a difficult issue for the participants of economy. This matter has signs of dysfunction especially in the construction sector, but it is a common problem in other important areas and gives a hard time to private persons as well.
In Hungarian law, creditors have a variety of ways to vindicate their claims. The tribute’s amount, expiry, the creditor and the debtor are determining circumstances that take effect on which method persons use to enforce their claims.
- Prompt sent by the lawyer
Sending the prompt to the debtor is the first step of a litigation or other procedures. Prompt made by a lawyer consists of a summary about the tribute’s title, expiriation, amount and a detailed analysis on the legal relationship underlying the tribute. Prompt also contains clear and complete pieces of information about the expiration date and a coverage of circumstances in case of non-performance. A well-constructed prompt is not only the easiest and most inexpensive way of vindicating claims, but it can often lead to a quick arrangement between the creditor and the debtor.
Advantages: Inexpensive and often leads to arrangement.
Disadvantages: In case of non-performance or contradictions, the creditor’s claim is unenforceable and other ways of vindication should be used.
- Warrant of payment
Warrant of payment must be procceeded in front of a notary. After the creditor points the title of the tribute and pays 3 % of fee, the notary fills up the warrant of payment in which he/she warns the debtor to pay his/her tribute. If the debtor doubts the warning, he/she has to hand in a contradiction to the notary. In this case the creditor can bring an action againts the debtor, so that the court adjudicates the foundedness of the claim. Inasmuch the debtor doesn’t hand in a contradiction to the notary in time, the warrant of payment becomes legally binding and becomes executable.
Administrative fee: 3% of the sum vindicated, at least 5 000 HUF.
Advantages: Quick, cost-effective, enforcable.
Disadvantages: If the debtor contradicts, only the court has the right to examine the creditor’s claim.
Litigation can be a continuation of the warrant of payment-procedure or in certain cases, creditor can directly bring an action againts the debtor. During the proceedings the court inquires the creditor’s vindication on the merits and conducts the evidence procedure. At the end of the procedure the court delivers a judgment about the vindication. In general terms, each party has 15 days from the notification of the decision to file an appeal againts the judgement.
Fee: 6% of the sum vindicated. It contains the administrative fee of the warrant payment.
Advantages: The creditor’s vindication is examined on the merits and the court conducts verification process. Expenses of the procedure are defrayed by the losing party.
Disadvantages: Time-consuming and expensive.
- Liquidation procedure
The liquidation procedure’s goal is to scrutinise whether a company is insolvent or not. Claims can be vindicated in this procedure as well, since if the debtor company intends to avoid liquidation, the only option to achieve this is to perform all the claims registered in the liqidation
procedure. The court only examines the necessary terms mentioned in the Bankruptcy Act concerning the company’s solvency. There’s no verification process on the merits of the creditor’s vindication.
Fee: 80 000 HUF
Publication fee: 25 000 HUF
Advantages: It is often quicker and cheaper than litigations. The fee is fixed, so there’s no need to pay more sum even if a bigger claim is registered in the procedure.
Disadvantages: Performance of the tribute can be reclaimed in civil procedure by the debtor.
- Arbitral tribunal procedure
Arbitral tribunal procedure is one of the rarest ways of vindicating claims in practice. It mainly regulates the disputes between companies and private persons who are doing business as a profession. Parties can include an arbitration clause in the contract, or agree on it later.
Advantages: The procedure is quicker than litigations. Awards of arbitration tribunals and judical judgements have the same binding legal force.
Disadvantages: One of the more expensive ways of vindicating claims.
You can find the German version of this article (debt collection) on our German website.
Dobos István attorney at law (ügyvéd / Rechtsanwalt / attorney at law; Budapest)
Phone / Whatsapp: +36303088151